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E7.17 (LO 4), AP Rigley Company expects to have a cash balance of $46,000 on January 1, 2022. These are the relevant monthly
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Answer #1
Cash Budget for two months is as below -
Particulars January February
Opening cash balance $46,000.00 $24,000.00
Add - Collection from Customers $71,000.00 $146,000.00
Less - Payments to Suppliers $40,000.00 $75,000.00
Less- Wages $30,000.00 $40,000.00
Less-

Administrative expenses (excluding Depreciation -refer note 1)

$20,000.00 $23,000.00
Less- Selling expenses $15,000.00 $20,000.00
Add - Sale of short term investment in January $12,000.00 $0.00
Cash balance at the end of the Month before borrowing loan $24,000.00 $12,000.00
Add- Loan borrowed from local bank $0.00 $8,000.00
Cash balance at the end of the Month after borrowing loan $24,000.00 $20,000.00
Note 1- Administrative expenses include depreciation of $1,000 which is non cash item and it will not effect cash budget & hence excluded.
Note 2- In the end of January, cash balance is $24,000 as computed which is more than the minimum monthly cash balance required of $20,000. So there is no need to borrow loan from local bank.
Note 3- Opening balance of February is the closing balance of January.
Note 4- Loan required to be borrowed in the month of February as the closing balance is less than minimum monthly requirement.
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